The hedge fund yesterday entered a plea through its general
counsel, who appeared in Manhattan federal court before U.S.
District Judge Laura Taylor Swain. Insider-trading trials of two
SAC fund managers are scheduled over the next three months in
the same courthouse -- trials that could still put the hedge
fund’s founder, Steven A. Cohen, in jeopardy, should either
defendant seek a plea bargain and cooperate with the U.S. in its
continuing probe of the firm’s employees.

Cohen didn’t attend yesterday’s hearing, at which SAC
General Counsel Peter Nussbaum entered the plea to four counts
of securities fraud and one count of wire fraud. Swain said she
wanted time to review a pre-sentence report and the sentencing
submissions from the government and SAC before deciding whether
she would accept the plea. She set sentencing for March 14.

“On behalf of SAC, I want to express our deep remorse for
the misconduct of each individual who broke the law while
employed at SAC,” Nussbaum said in court. “This happened on
our watch, and we are responsible for that conduct.”

Jonathan Gasthalter, a spokesman for SAC, and lawyers for
SAC declined to comment after court on the judge’s decision.

Manhattan U.S. Attorney Preet Bharara said in a statement
that “financial institutions should know that they are not
automatically immune from prosecution, and we will hold
companies, as well as individuals, accountable wherever
appropriate.”

Shutter Business

SAC has agreed to pay a record $1.8 billion and shutter its
investment advisory business as part of an accord announced
Nov. 4 to end both a prosecution and a federal money-laundering
suit brought by the Justice Department.

Assistant U.S. Attorney Arlo Devlin-Brown told Swain the
government had amassed more evidence against the hedge fund and
other SAC employees who haven’t pleaded guilty that could have
been presented if the case had gone to trial.

The case includes illicit trading by SAC fund managers and
analysts dating back to 1999, Devlin-Brown said, and involves
evidence of “institutional failures” regarding compliance and
oversight of employees.

“The defendants engaged in conduct that was facilitated by
institutional practices that encouraged SAC employees to pursue
an informational edge,” Devlin-Brown said. “SAC exhibited an
institutional indifference on whether that information was
lawfully obtained.”

Pending Action

Cohen, 57, who founded SAC in 1992, wasn’t charged in the
indictment of the Stamford, Connecticut-based firm. He still
faces an administrative action filed by the U.S. Securities and
Exchange Commission for his alleged failure to supervise the
hedge fund’s activities.

Earlier yesterday, Sandeep Aggarwal, a former research
analyst with Collins Stewart LLC, pleaded guilty to passing
inside information about a deal involving Yahoo! Inc. and
Microsoft Corp. to former SAC fund manager Richard Lee and
others. Aggarwal, who faces as much as 25 years in prison when
he’s sentenced, is cooperating with the government.

Illicit Tips

SAC portfolio manager Michael Steinberg is scheduled to go
on trial Nov. 18 for allegedly engaging in insider trading in
Dell Inc. and Nvidia Corp. based on illicit tips provided by Jon
Horvath, his analyst. Horvath, who has pleaded guilty and is
cooperating with the U.S., is scheduled to be a witness against
Steinberg, the longest-serving SAC employee of those the U.S.
has charged in its insider-trading probe.

Steinberg’s lawyer has asked the judge presiding over that
case to allow evidence about how other SAC fund managers traded
on information provided by Horvath, showing they didn’t think it
was improperly obtained.

Prosecutors said they had evidence that in August 2008,
Cohen liquidated his entire long position in Dell within minutes
after Horvath sent Cohen and Steinberg an e-mail that the
computer maker would miss Wall Street estimates. Cohen hasn’t
been charged with wrongdoing in those trades. Prosecutors said
Nov. 7 that they didn’t intend to use that evidence at
Steinberg’s trial.

Mathew Martoma, a former fund manager for a unit of SAC, is
scheduled to go to trial as early as Jan. 6 for allegedly using
inside information from two doctors who were involved in the
clinical trial of an Alzheimer’s drug to trade shares of Elan
Corp. and Wyeth.

Clinical Trial

Prosecutors claim Martoma used illegal tips to help SAC
make profits and avoid losses of $276 million -- the biggest
insider-trading case in history. The U.S. said Cohen traded on
the stocks after receiving the information from Martoma about
the clinical trial’s disappointing results.

After SAC’s guilty plea, Ethan Wohl argued on behalf of
investors in Elan and Wyeth who are suing the hedge fund over
its alleged insider trading in those stocks. Wohl said investors
are victims of SAC’s crime and urged Swain to reject the plea
because of SAC’s failure to take responsibility for its Elan and
Wyeth trades.

“The allocution made no reference to these trades and no
acknowledgment of fault in any of the crimes pled to,” Wohl
said, referring to Nussbaum’s statement.

‘Careful’ Judge

Anthony Sabino, who teaches law at St. John’s University in
New York, said he wasn’t surprised by the judge’s decision not
to rule immediately.

“She’s very thoughtful, very articulate, very careful,”
Sabino said. “She’s going to give this a lot of thought.”

Sabino said that while Swain may question parts of the
agreement, he doesn’t think she will reject it outright.

Swain may require SAC to be more forthcoming in the
criminal conduct it’s willing to admit or require changes to
other details of the agreement as a condition for her approval,
he said. The general terms of the deal will probably remain
intact, he said.

The criminal case is U.S. v. SAC Capital Advisors LP, 13-cr-00541, U.S. District Court, Southern District of New York
(Manhattan). The civil case is U.S. v. SAC Capital Advisors LP,
1:13-cv-5182, U.S. District Court, Southern District of New York
(Manhattan).